Wesfarmers Ltd (ASX: WES) shares may be one of the most underrated dividend picks in the ASX blue-chip space.
It's normally names like BHP Group Ltd (ASX: BHP) and Commonwealth Bak of Australia (ASX: CBA) that get a lot of the attention from income investors. But, the owner of Bunnings, Kmart, Officeworks, Priceline and several other businesses could be an even better choice.
If an investor put $4,000 to work in Wesfarmers shares, they could unlock a pleasing amount of passive income. Let's look at the projection for the business and whether it's an attractive opportunity.
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Dividend projection for FY27
Wesfarmers has been steadily increasing its payout for shareholders in the last several years.
In the 2027 financial year, the business announced it would hike its annual dividend by 7.8% to $2.22 following an 8.3% rise of underlying earnings per share (EPS) to $2.534.
Analysts now expect the business can grow its annual dividend in FY27 as well. According to the projection on Commsec, the operator of Bunnings and Kmart could pay an annual dividend per share of $2.34. This would represent a year-over-year increase of 5.4%
At the time of writing, the potential payout of $2.34 per share in the 2027 financial year could translate into a dividend yield of 3% excluding franking credits and 4.3% including franking credits. That's not the biggest dividend yield on the ASX, but it has become significantly more attractive after the 15% decline of the Wesfarmers share price in the last month.
What a $4,000 investment would do in Wesfarmers shares
At the time of writing, if an investor put $4,000 into Wesfarmers, they'd be able to buy 52 Wesfarmers shares.
Based on the dividend projections, an investor with 52 Wesfarmers shares could unlock $121.68 in dividend cash and $173.83 in grossed-up dividend income, including franking credits.
Is this a good time to invest in Wesfarmers shares?
The company had a solid FY26, with high single-digit underlying EPS growth. Both Kmart and Bunnings delivered mid-single-digit earnings growth during the year, and management reported ongoing solid sales growth for both businesses in the first few weeks of FY27.
Let's look at Wesfarmers' appeal to analysts. According to CMC Invest, there have been 11 analyst ratings on the business within the last three months. Two were a buy, three were a hold, and six were a sell.
The average price target from those 11 analysts is $78.46, implying a possible 2% rise over the next year.
That may not be a very compelling return on offer to some investors, so there could be even better ASX shares to consider.
